10-K: MedWellAI Pivots to AI Healthcare, Faces Going Concern Doubt

MedWellAI, Inc. reported a strategic shift from digital asset mining to AI-driven healthcare, alongside substantial net losses and a going concern warning for the fiscal year ended June 30, 2025.

Summary

• The company changed its name to MedWellAI, Inc. in June 2025, reflecting a strategic pivot from digital asset mining to AI-driven healthcare and wellness solutions.
• Current operations are focused on MedWell USA, a B2B e-commerce platform for distributing pharmaceutical products, particularly GLP medications for weight loss and diabetes management, featuring an AI-powered ordering system.
• MedWellAI acquired 51% of Healthy Lifestyle USA LLC on August 29, 2024, for $350,000 ($250,000 cash and 97,087 common shares worth $100,000).
• Management decided to no longer pursue Healthy Lifestyle's online sales business due to regulatory hurdles, resulting in a full impairment of $670,329 in goodwill and $81,796 in intangible assets.
• Digital asset mining operations were discontinued as of June 7, 2024, and the hosting agreement was terminated on February 7, 2025, leading to a $352,397 gain on settlement of payables.
• The company reported a net loss of $3,607,145 for the year ended June 30, 2025, an improvement from a $12,012,228 net loss in 2024.
• Total revenue for the year ended June 30, 2025, was $594,768, primarily from commissions ($576,931) and online sales ($17,837).
• Current liabilities exceeded current assets by $2,637,137 as of June 30, 2025, and the company had an accumulated deficit of $88,673,880, raising substantial doubt about its ability to continue as a going concern.
• One customer generated approximately 96% of total revenue for the year ended June 30, 2025.
• Steve Rubakh, the sole officer and director, controls a majority of the company's voting power.
• Material weaknesses in internal control over financial reporting were identified, including a lack of independent directors and issues with segregation of duties.
• Subsequent to year-end, on August 1, 2025, a share exchange agreement consolidated Series C and D Preferred Stock into a single Series C class and retired $2,133,081 in accrued and unpaid dividends.

Sentiment

Score: 3

Explanation: The company is undergoing a significant strategic pivot, which is positive in intent, but current financial performance remains weak with substantial losses, negative cash flow, and a going concern warning. The impairment of a recent acquisition and identified material weaknesses in internal controls are significant concerns. The subsequent event of retiring accrued dividends is a positive step for the balance sheet, but overall, the company faces substantial challenges.

Positives

• Net loss significantly decreased to $3,607,145 in 2025 from $12,012,228 in 2024, representing a substantial reduction in losses.
• Successfully exited digital asset mining operations, recognizing a $352,397 gain on settlement of payables and an $88,780 gain on the sale of property and equipment.
• Successfully transitioned business focus to the AI-driven healthcare and wellness sector, a potentially high-growth market.
• Revenue from commissions increased to $576,931 in 2025 from $0 in 2024, indicating new revenue streams from the health and wellness business.
• Online sales revenue increased to $17,837 in 2025 from $0 in 2024.
• Interest expense decreased to $52,239 in 2025 from $83,046 in 2024 due to a reduced interest rate on a note payable.
• Subsequent to year-end, the company consolidated Series C and D Preferred Stock and retired $2,133,081 in accrued and unpaid dividends, improving the balance sheet.

Negatives

• Incurred a net loss of $3,607,145 for the fiscal year ended June 30, 2025, indicating continued unprofitability.
• Current liabilities exceeded current assets by $2,637,137 as of June 30, 2025, reflecting a weak liquidity position.
• An accumulated deficit of $88,673,880 as of June 30, 2025, highlights significant historical losses.
• Auditors issued a going concern qualification, raising substantial doubt about the company's ability to continue operations.
• Goodwill of $670,329 and intangible assets of $81,796 were fully impaired due to the decision to abandon the online sales business of Healthy Lifestyle USA LLC because of regulatory hurdles.
• Generated negative cash flow from operations for both the years ended June 30, 2025 ($935,312 used) and 2024 ($1,059,934 used).
• Revenue is highly concentrated, with one customer generating approximately 96% of total revenue in 2025, posing a significant risk if that customer is lost.
• A $500,000 note payable with BHP Capital NY, Inc. was in default as of June 30, 2025, due to nonpayment.
• Identified material weaknesses in internal control over financial reporting, including a lack of independent directors and issues with segregation of duties.
• The company is an early-stage enterprise with minimal revenue and a history of losses.
• The company's common stock is deemed 'penny stock,' which may limit market liquidity and investor interest.

Risks

• Inability to operate profitably due to being an early-stage company with minimal revenue and a history of losses, potentially leading to cessation of operations and total loss of investment.
• Significant decrease in revenue if the single major customer, which generated approximately 96% of 2025 revenue, is lost.
• Adverse impact on business and financial results from the use of artificial intelligence (AI) or other emerging technologies, including deficiencies in AI-generated content, competitive disadvantages, regulatory uncertainty, cybersecurity risks, intellectual property infringement, and unintended biases.
• Natural disasters and geo-political events could adversely affect the business.
• Raising additional capital may cause dilution to existing stockholders, restrict operations, or require relinquishing valuable rights.
• Vulnerability of information technology systems and infrastructure to breakdowns, unauthorized access, cyber-attacks, and data privacy breaches.
• Inability to attract, train, and retain key management, technical, regulatory, and financial personnel, particularly with experience in pharmaceutical products.
• Heavy dependence on Chief Executive Officer Steve Rubakh; his departure could significantly undermine management expertise and operational ability.
• Auditors' going concern qualification raises substantial doubt about the ability to continue as a going concern.
• Inability to respond quickly enough to changes in technology and regulatory standards, or to successfully develop and introduce new and enhanced products on a timely basis.
• Lack of effective internal controls over financial reporting may affect the market for and price of common stock and make it more difficult to raise capital.
• Common stock is deemed 'penny stock,' which may make it more difficult for investors to sell their shares due to disclosure and suitability requirements.
• FINRA sales practice requirements may limit a stockholder's ability to buy and sell the company's stock.
• The market price for common stock may be volatile and influenced by numerous factors beyond control, including low trading volume and potential manipulation.
• Issuing equity or convertible debt securities could dilute the net tangible book value of common stock and impose restrictions on working capital.
• The terms of outstanding preferred stock (Series A, B, C, D) could adversely affect the voting power or value of common stock.
• Concentrated ownership of voting stock by Steve Rubakh limits other stockholders' voting power.
• Lack of a majority of independent directors on the board and absence of various corporate governance measures may provide limited protections against interested director transactions and conflicts of interest.
• No current plans to pay dividends on common stock; investors must look solely to stock appreciation for a return on investment.

Future Outlook

The company anticipates needing to raise additional capital for expansion and future operations, with timing dependent on ongoing operations and new development expenses. Funding is expected to come from public or private equity/debt financings or collaboration agreements, though availability on favorable terms is not assured. Management plans to address the structure of the Board of Directors and discuss adding an audit committee during the fiscal year ending June 30, 2026.

Management Comments

• "We are a diversified holdings company that develops, acquires, operates, and invests in unique and profitable businesses. Our business focus is on AI-driven healthcare and wellness solutions."
• "Currently, the company operates through their subsidiary MedWell USA, a B2B e-commerce platform for distributing pharmaceutical products, particularly GLP medications for weight loss and diabetes management. It features an AI-powered ordering system with real-time inventory tracking, smart suggestions, and dedicated support for healthcare providers."
• "During the year ended June 30, 2025, due to regulatory hurdles, management decided to no longer pursue their online sales business which was obtained through the acquisition of Healthy Lifestyles USA LLC."
• "We anticipate that we will seek to fund our operations through public or private equity or debt financings or other sources, such as potential collaboration agreements. If additional financing is required, we cannot be certain that it will be available to us on favorable terms, or at all."
• "Management plans to address the structure of the Board of Directors and discuss adding an audit committee during the fiscal year ending June 30, 2026."

Industry Context

MedWellAI's pivot to AI-driven healthcare and wellness, specifically GLP medications, aligns with a growing trend in personalized medicine and digital health platforms. The use of AI for ordering and inventory management positions the company to potentially capitalize on efficiency gains in a competitive pharmaceutical distribution market. However, the abandonment of the Healthy Lifestyle online sales business due to regulatory hurdles highlights the significant compliance challenges in the rapidly evolving digital health and pharmaceutical sectors. The exit from digital asset mining reflects a broader industry consolidation and increased competition in that space, allowing the company to focus on a more specialized, high-growth area, albeit one with its own regulatory complexities.

Management Changes

Corporate Governance

Legal Proceedings

• No pending or threatened lawsuits were reported as of the filing date.

Related Party Transactions

• Steve Rubakh, the sole executive officer and director, received an annual salary of $250,000 and quarterly cash bonuses of $100,000 (total $650,000 for FY2025).
• Accrued salary to Mr. Rubakh totaled $209,419 as of June 30, 2025.
• In FY2024, Mr. Rubakh received 50,000 shares of Series B convertible preferred stock (valued at $8,300,000) as compensation.
• Mr. Rubakh converted 20,000 shares of Series B preferred stock into 2,000,000 shares of common stock in FY2024.
• Tioga Holding, LLC, 50% owned by Mr. Rubakh, incurred $0 in power expense from the company in FY2025 (down from $96,527 in FY2024) due to termination of mining operations at that facility.
• Mr. Rubakh owns/controls a majority of the voting power (50.6% of common stock, 100% of Series A and B preferred stock, which represent significant voting shares).

Stakeholder Impact

• Shareholders: Face significant dilution risk from future capital raises, potential volatility in stock price (penny stock status), and limited voting power due to concentrated ownership by Steve Rubakh. The going concern warning poses a risk of total loss of investment. The retirement of accrued preferred dividends is a positive for common equity holders.
• Employees: Currently only one full-time employee (Steve Rubakh). Future growth depends on attracting and retaining qualified personnel.
• Customers (Healthcare Providers): Benefit from the AI-powered B2B e-commerce platform for GLP medications, offering real-time inventory and smart suggestions. However, the company's financial instability could pose supply chain risks.
• Creditors: The $500,000 note payable is in default, indicating elevated credit risk. The retirement of accrued preferred dividends improves the balance sheet.
• Regulatory Authorities: The company faces regulatory hurdles, as evidenced by the abandonment of Healthy Lifestyle's online sales business, and regulatory uncertainty related to AI.

Next Steps

• Raise additional capital for expansion and future operations.
• Address the structure of the Board of Directors.
• Discuss adding an audit committee during the fiscal year ending June 30, 2026.
• Evaluate the impact of ASU 2024-03 on consolidated financial statements.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by recurring net losses, negative operating cash flow, a substantial accumulated deficit, and current liabilities significantly exceeding current assets. The auditor's going concern qualification highlights the high risk of business failure. While the strategic pivot to AI-driven healthcare is a positive direction, the immediate impairment of a recent acquisition due to regulatory hurdles demonstrates execution challenges and significant capital misallocation. The high revenue concentration with a single customer, coupled with material weaknesses in internal controls and a lack of independent governance, further exacerbates operational and financial risks. Despite the recent retirement of preferred dividends, the overall financial health and operational stability are highly concerning, making the stock a high-risk investment with a strong likelihood of further value erosion.

Keywords

AI-driven healthcare, wellness solutions, pharmaceutical distribution, GLP medications, weight loss, diabetes management, B2B e-commerce, SEC filing, 10-K, financial reporting, corporate governance, risk management, MedWellAI, Healthy Lifestyle USA, goodwill impairment, going concern, digital asset mining exit, stock-based compensation, related party transactions, internal controls, penny stock